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MUMBAI: Reserve Bank governor Shaktikanta Das on Friday said that as a multilateral organisation entrusted with oversight of the international monetary system, the International Monetary Fund (IMF) should be looking at currency management of individual members and should not be looking at a bilateral perspective based on which some are labelled “currency manipulators”.

Das’ remarks came in the context of the United States labelling India and China as “currency manipulators”. This, he added, was of recent vintage dating to 2015 when the US Treasury started publishing a semi-annual report. “In this backdrop, it has acquired a predominantly bilateral connotation … India was recently removed from that list after featuring in it from 2018,” Das said.

The US has been judging countries as currency manipulators based on two of three criteria: if bilateral trade surplus is at least USD 20 billion with the US, a material current account surplus of at least 2 per cent of GDP and one-sided net purchases adding to at least 2 per cent of GDP.

Das asked, “how do we collectively ensure that multilateral principles and frameworks for orderly exchange rate and payment arrangements are not superseded by bilateral hegemony?” The best way forward was to strengthen institutions like the IMF and make them more relevant and trusted. “I strongly believe that a multilateral framework under the aegis of the IMF is the most appropriate approach to deal with these issues,” he said.

More importantly, Das raised a critical issue of advanced economies (AE) pursuing lower interest rate policies without recognising the adverse impact on emerging market economies (EME). At the global level, the total amount of bonds with negative yields has risen to USD 13 trillion, implying that nearly a third of AE government bonds trade at negative yields.

“Equity premium has crossed 4 per cent, one standard deviation higher than its long-term average. Return to lower interest rates in AEs pose challenges as leverage has already built up in EMEs and the needed deleveraging is not complete in many European economies,” he said.

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